Increase supply in Metro Vancouver's active housing market

When looking at the numbers comparing April 2020 to April 2021 we must obviously take into account the beginning of the pandemic in April of 2020 when housing sales virtually froze at just over 1,100 units. This April, Greater Vancouver sales had soared almost 340% compared to the same month a year earlier to almost 5,000 transactions to set the all-time high for the month.

This performance may convince many sellers the Metro Vancouver housing market is now poised to roar into the record books with month-over-month sales and price increases continuing to set a record pace. In reality, though, the housing market, relatively speaking, is quietly slowing down and more balanced conditions will become the new normal, at least until the pandemic truly ends and the BC economy and its traditional immigration levels return.

Total Greater Vancouver sales in April were down 14% from a month earlier, the first month-over-month decline in almost a year.

With total sales averaging 260 per day in April, it is hard to consider this a slowing pace, but the incredible frenzy that has characterized the market over the past few months is settling down.

This should be welcomed by both sellers and buyers. Sellers can still expect to sell their property quickly, but in most cases will not be dealing with frantic, no-subject, multiple bids and concern about where they will find another home to buy. Fatigued buyers will regain the opportunity to shop the market more carefully and present more normal subjects and prices when negotiating on a sale.

There are number of reasons for the evolution of the market to more balanced conditions, but the main change is a huge increase in supply. In April, 8,124 new listings were added in Greater Vancouver, the highest April level in history.

As well, new housing starts in the first-quarter of 2021 hit 7,332 units, 3,000 more than in Q1 2020. Many strata developers who had delayed or stopped projects last year, due to the pandemic, are now rushing to get product onto the market. In March alone, 3,210 new condo apartments were started, the highest March level in more than five years.

As we head into May, upcoming changes to the mortgage market stress test may spur some buyers to act quickly. If passed, effective June 1, traditional buyers with at least a 20% down payment will be required to qualify at a five-year mortgage rate of 5.25%, which is 50 basis points higher than the current stress test. But this change should not make much difference. Buyers don’t have to pay the higher rate, simply qualify for it. The new stress test is expected to reduce the qualifying mortgage amount by around 4%, a relatively low barrier in Metro Vancouver, where composite home prices are increasing an average of 2% every month.